1www.acordinternational.org

Defending rights. Promoting justice.

CHINESE, BRAZILIAN AND INDIAN INVESTMENTS IN AFRICAN AGRICULTURE:

IMPACTS,OPPORTUNITIES AND CONCERNS

Implications for ACORD’s Programming10 October 2016Fairview Hotel, Nairobi

2

Introduction• This study is done under ACORD’s Pan Africa Programme supported

by Oxfam Hong Kong• It offers new analysis of Chinese, Brazilian and Indian investments in

African agriculture. • This first phase of the study brings together three new case studies of

Chinese investment and aims to assess the impacts of those investments on Africa's small-scale farmers.

• There will be a second phase, focusing on case studies of Brazilian, Indian and South Africa investments in African agriculture.

• This report aims to assess the impacts of investment on Africa's small-scale farmers, and also considers the impact of some aid.

• The fundamental question then is “can the BRICS be a strategic partner that can bring new types of funding to ACORD?”

3

Methodology • This study employed a range of analytical techniques and

methodologies, but mainly focused on qualitative research:

• 1) Desk review of all appropriate documentation, including current available secondary literature from academic, media and NGO, as well as official documents from relevant institutions,

• 2) Investigative case study research using interviews with a wide selection of stakeholders, including local communities, public officials, and staff at companies

4

Methodology

• While the report in a broad sense covers Brazilian and Indian investment in Africa, as well as Chinese, it was decided to focus the country case studies on the latter only for now in order to highlight the diversity of investments and impacts.

5

Investments in Agriculture by the BRICS

• Despite much rhetoric, Brazilian, Indian and Chinese investments and aid in African agriculture remain relatively less than generally imagined, especially compared to those of OECD countries and multilateral actors such as the World Bank.

• These countries have increased their influence in African agriculture in recent years to become important actors, and this influence is likely to grow in the future.

6

Chinese Investment

• Figures for agricultural investments vary widely according to different sources:

• Chinese government figures from 2013 are that FDI in African agriculture stood at $82 million in 2012

• More recent figures from the Chinese government are that China has invested over $700 million in agriculture in Africa (over an unspecified time period).

• Another estimate is that the value of Chinese investment in farming in Africa was somewhere between $172 million and $488.5 million in 2012.

7

Chinese investment• In terms of the number of projects, Chinese government

figures from 2013 claim that China had approved 212 agriculture-related projects (grains, cash crops, animal husbandry, fisheries, forestry, agro-processing and commodity trade) in 37 African countries by March 2013.

• Of these, 86 were specifically related to farming (production of grains, cash crops or animal husbandry) in 27 African countries. The six countries with the most projects were Zambia, Zimbabwe, Nigeria, Sudan, Mozambique and Tanzania.

• These investments are often complemented and supported by aid efforts of which two key related areas stand out – agricultural technology demonstration centres and training.

8

Select Chinese-aided agricultural technology: demonstration centres in Africa

• It is not clear exactly how many agricultural technology demonstration centres China has established in Africa. The government stated in 2013 that it had set up 15 since 2006. In December 2015, it stated it has built 25. These centers are run by quasi-private companies on behalf of the Chinese state, involving the transfer of knowledge, seeds and mechanised farming equipment through intensive training courses aimed at farmers

Country

Major focus of the centre

Benin

Crop cultivation demonstration and farming technology training

Cameroon

Research, technology demonstration and training on agricultural technology

Republic of Congo Crop cultivation demonstration and trainingEthiopia

Horticultural plants cultivation and livestock farming technology, demonstration and training

Liberia

Rice and corn cultivation technology transfer, training, development of plant varieties

Mozambique

Soya bean and corn cultivation and processing, demonstration and training

Rwanda

Rice, juncao, mulberry cultivation, soil and water conservation, technology demonstration and training

South Africa

Research, technology demonstration and training on freshwater aquaculture

Sudan

Crop cultivation and irrigation technology, demonstration and training

Tanzania

Crop cultivation demonstration, development of improved plant varieties, training

Togo Research and training on agricultural technologyUganda

Agriculture technology demonstration, technology transfer and training

Zambia Agriculture technology demonstration and trainingZimbabwe Corn cultivation technology transfer and training

9

Brazil Investment• Brazil´s National Development Bank (BNDES) is the principal source of

financing to African governments and Brazilian companies and has developed several mechanisms to finance foreign investments, notably a credit line for Brazilian firms in 2003. Financing has been focused on Angola and Mozambique and on large companies such as the state-owned oil company Petrobras, mining firm Vale and leading construction firms in the infrastructure, minerals and petroleum sectors.

• The Africa office of Embrapa, Brazil’s leading agricultural research institute, has forged a large number of bilateral biofuel cooperation agreements with African countries, such as Angola, the Democratic Republic of Congo, Ghana, Kenya, Mozambique, Nigeria, Senegal, Sudan, Uganda and Zambia. Projects involve technology transfer and training, enabling countries to develop their own biofuel industries and reduce their dependence on oil.

10

Brazil Investment• Brazilian companies, backed by the Brazil´s National Development

Bank (BNDES), are promoting sugarcane/ethanol projects in various countries, for example:

• In Angola, Brazilian corporation Odebrecht has set up a plant in collaboration with the Angolan state-owned oil company, Sonangol, to produce ethanol and contribute to electricity supply

• In Ghana, the BNDES is providing a $300 million loan to Northern Sugar Resources to build a sugar cane complex for the production of ethanol, involving Brazilian company Constran in building the ethanol plant.

11

Brazil Investment• In Sudan, the Kenana Sugar Company contracted the Brazilian company Dedini,

supported by Brazilian finance, to build an ethanol plant to complement its long established sugar complex.

• Aside from ethanol, Brazil’s engagement in African agriculture tends to be through specific bilateral or trilateral projects.

• However investment is still at a low level. In 2009, for example, it was estimated that Brazil’s total development cooperation programme (not just in Africa) amounted to just US$362 million, or around 0.02 per cent of Brazil’s national income.

• Two key programmes are the Food Acquisition Programme and More Food Africa

12

India Investment• Indian investment in Africa focuses on energy resource extraction,

manufacturing, financial services, and infrastructure development, in addition to agriculture.

• Private companies are the main vehicle for Indian investments in African agriculture and Indian agribusiness is notably involved in selling modern farm technology, such as irrigation pumps, tractors and harvesters and/or investing in large-scale farms or plantations, notably in Ethiopia.

• Indian investments in African land have been explicitly promoted by government policies, especially lines of credit (LOCs) to foreign countries from India’s Export-Import Bank (Exim Bank), which are used by countries to purchase Indian goods and services. LOCs, which are soft loans, have been signed with around 40 African countries, amounting to around $1.2 billion for agriculture-related projects during 2003-12.

13

Indian Investment• The largest line of credit approved by Exim Bank outside

the Indian subcontinent was a $640 million loan to Ethiopia for its Tindaho sugar project, a sugar expansion project in Ethiopia.

• Other LOCs have been provided to develop maize, rice, wheat, cotton and coffee production, among others, in Africa.

• In October 2015 India had committed $7.4 billion in concessional credit and $1.2 billion in grants to cooperation mechanisms with Africa (not just to agriculture) since 2008.

14

A Sample of Indian Companies Investing in Agricultural Land in Africa

Karuturi AgroProducts Plc/Karuturi Global

Ethiopia Acquired 100,000 ha in Gambella region for growing palm, cereal and pulses, with conditional option to acquire another 200,000 ha.

Ruchi Soya Ethiopia Acquired a 25-year lease for soyabean and processing unit on 152,649 ha in Gambella and Benishangul Gumaz states

VerdantaHarvests Plc

Ethiopia Acquired a 50-year lease for 5,000 ha in the Gambella region for a tea and spice plantation

Chadha Agro Plc Ethiopia Acquired up to 100,000 ha in Guji Zone in Oromia regional state for a sugar development project

VarunInternational

Madagascar Subsidiary Varun Agriculture Sarl leased or purchased232,000 ha to grow rice, corn and pulses

Uttam Sucrotech Ethiopia Won a $100-million contract to expand the Wonji-Shoa sugar factory

McLeod RusselIndia

Uganda Purchased tea plantations worth $25 million, includingUganda’s Rwenzori Tea Investments

ACIL CottonIndustries

CongoandEthiopia

Plans to invest nearly $15 million (Rs 68 crore) for land leases to start contract farming pulses and coffee in Congo and Ethiopia

Sannati AgroFarm EnterprisePvt. Ltd

Ethiopia Acquired a 25-year lease on 10,000 ha in Dimi District,Gambela region, for cultivation of rice, pulses and cereals

Jay Shree Tea &Industries

Rwanda,Uganda

Acquired two tea plantations in Rwanda and one in Uganda

ACIL CottonIndustries

CongoandEthiopia.

Announced plans in January 2011 to invest nearly $15 million (Rs 68 crore) to start contract farming of crops like pulses and coffee in Brazil, Congo and Ethiopia.

BHO BioProducts Plc

Ethiopia Acquired 27,000 ha to grow cereal, pulses and edible oil crops

15

Case Study 1: The Osukuru fertilizer project in Uganda launched in 2014

Major findings• The Guangzhou Dongsong Energy Group, a private Chinese

company with assets of over $1 billion• US$620 million project to build a fertilizer plant and conduct

phosphate mining in eastern Uganda (in the Osukuru hills of Tororo district)

• The project covers 26 square kilometres and could displace up to 1,500 households; some 122 have already have been relocated.

• The project is expected to employ around 1,000 people and produce 300,000 tonnes of phosphate fertilizer annually - enough to supply Uganda, Kenya, Tanzania and Rwanda.

16

Major findings

• Over 90 per cent of people relocated are no longer relying on agriculture as their source of livelihood, since most did not acquire land big enough to produce food to sustain their households.

• Relocation process did not involve adequate preparation: for instance, training on alternative sources of livelihood or financial literacy training and business skills.

• Thus most people moved in ignorance, without ensuring a reliable source of income to sustain them in future.

17

Recommendations

The research concluded that the government and company should:• publish the Mineral Agreement for the project, showing its fiscal and other

terms• publish details on how much Uganda can be expected to earn from the project• support those already relocated by providing training on financial literacy and

business skills to enable them to establish alternative livelihoods• ensure that any future resettlement promotes the free, prior and informed

consent of all those affected and provide trainings to enable people to establish alternative livelihoods

• The government of Uganda should also: • invest more in ensuring that its extension service is able to provide good

advice to farmers on the use of fertilizer. • However, it should not see increasing use of chemical fertilizer as a priority for

smallholder farmers; it should also invest in agro-ecological farming.

18

Case Study 2: The China Agricultural Technology Demonstration Centre in Zambia

• The Zambia Agricultural Technology Demonstration Centre (ZATDC) project was officially commissioned in May 2008. Construction work was completed in January 2011

• It has a total area of 120 hectares of which 75 hectares is under irrigation.

19

Major findings

• Training offered by the Centre was valuable. • 718 people trained so far• However, there are a number of problems with the process.

Ministry of Agriculture staff from the headquarters in Lusaka reported the lack of involvement of district field staff during the formulation of work plans, this makes it impossible to design training programmes that are appropriate for small-scale farmers.

• Due to somewhat uncoordinated programmes, district agricultural staff have not been able to take follow-up measures to see how the trained farmers have utilized the skills acquired from the Centre.

20

Recommendations

• The research concluded that the Centre and Ministry of Agriculture should:

• Increase the Centre’s publicity work so that farmers and the agricultural staff at district level are aware of the training programmes on offer.

• Conduct follow ups after trainings to evaluate impact and assess progress among the beneficiaries.

• Involve small-scale farmers and their representatives in the design and implementation of training programmes and ensure that these are focused on the identified priority needs of small-scale farmers.

• Provide transparency on the Centre’s budget.

• Base the Centre’s activities firmly on the priorities outlined in Zambia’s National Agricultural Investment Plan under the CAADP framework

21

Case Study 3: A Sisal farm in Tanzania

• The sisal farm, located in Kilosa district and Rudewa township, is owned by the Chinese government’s China National Agricultural Development Group which established the China Africa Agriculture Investment Company (CAAIC).

• The sisal farm is known as the Rudewa and Kisangata Estates: the Rudewa Estate has a total land area of 2,892 hectares of which 1,218 hectares are planted with sisal. The Kisangata Estate amounts to 3,060 hectares, of which 530 hectares are planted with sisal, with much of the rest being foothills/swamp land.

22

Major findings• The farm has produced around 14,000 tonnes of sisal during 2000-15. Around

half of the farm’s sisal fibres are exported – mainly to China with some to Saudi Arabia – while the remaining half is sold in Tanzania for local processing.

• The provision of 414 direct jobs is significant in this rural area, which is probably generating many more jobs (The rule of thumb is that for every one direct employee, there are normally three indirect employees; this implies that 414 employees are creating about 1,242 indirect employees).

• The company’s current level of investment is $12 million. It had a turnover of Tshs 3.4 billion in 2014, from which it made profits of Tshs 140 million. The company pays various taxes, including the Skills Development Levy (SDL), corporate tax and Value Added Tax (VAT) to the central government, and licenses and the service levy to Kilosa District Council. The company stated that it paid Tshs 360 million (about $165,000) in taxes in 2015 and Tshs 32 million in 2013.

23

Recommendations

• The case study in Tanzania concluded that the company should:

• Revise its pay scales upwards• Ensure that workers are provided with adequate housing• Do more to procure the maximum of the company’s

procurement spending locally, in order to support local businesses more

• Set a website to provide key information on company activities

24

Implications for Programming

• Although the report finds that while some investments are bringing opportunities such as employment and local economic development, others are having adverse consequences on local small holder farmers.

• ACORD and partners should advocate for the following policies in order improve the BRICS and especially Chinese agricultural investments in Africa.

Transparency: • Provide a publicly-accessible detailed annual report of all their

cooperation projects in Africa, with information on funding and beneficiaries.

• Require private companies involved in large-scale investments in Africa to provide at least minimum publicly-available information giving details on these investments.

25

Implications for Programming

Appropriate technology• African governments and organisations should review the appropriateness

of Chinese technology transfer. China’s agricultural technology demonstration centres should be subject to an independent review, assessing how useful they are to African agriculture, especially smallholder farmers,

Alignment with African priorities• African governments should ensure that foreign investment and cooperation

programmes are aligned with national interests and frameworks such as the CAADP and are integrated into wider policy-making. Aid programmes from these countries should be brought under the general framework of donor/government relations and not stand outside this.

26

Implications for Programming

Involvement of smallholder farmers• African governments must ensure that smallholder farmers are

involved in the design and implementation of investment and cooperation projects by China. Such participation should be a requirement in all projects, notably large-scale land investments and technology programmes

“Land grabs” and large-scale investments• Governments should mind the displacements of large

populations to pave way for large foreign investments. Where displacements must happen, local populations must be provided with alternatives; land, financial support and skills to continue their livelihoods